Wall Street caused the economic crisis of 2008-09, but since the meltdown ended, the financial industry has seemed to escape much of the harm.
That may be changing. The uncertain outlook for banks’ profits has many of them planning major job cuts, The New York Times reports.
While bank earnings have rebounded since the financial system nearly crashed, they haven’t reached pre-crisis levels. And banks still have a ton of soured real estate-related loans and securities in their possession.
At the same time, many financial markets have weakened, the European debt crisis has intensified, and worries have increased over how the new financial reform law will affect Wall Street.
At Goldman Sachs, the most profitable bank on Wall Street, senior executives have decided to cut 10 percent, or $1 billion, of non-compensation expenses during the next year, a knowledgeable source told The Times.
Goldman hasn’t decided how many workers to can yet, but it’s “certain” to dump some in coming months, the source said. Bank of America, Credit Suisse and Morgan Stanley also plan job cuts.
“It’s a tense environment right now,” Glenn Schorr, an analyst with Nomura investment bank tells The Times.
For industry watchers, it’ll be interesting to see what happens to Wall Street pay at the upper echelons of management as these cuts come to fruition.
Average compensation for the top 15 bank CEOs in the U.S. and Europe jumped 36 percent last year from 2009, according to data compiled for the Financial Times by Equilar research firm.
That increase put the average compensation — salary plus bonuses — at $9.7 million.
Jamie Dimon of JPMorgan Chase and Lloyd Blankfein of Goldman Sachs saw their compensation rocket to more than 15 times their 2009 levels. Dimon hauled in $21 million, while Blankfein garnered $14.1 million.
To be sure, they’re still making a lot less than they did at the height of the financial bubble. Blankfein took home $70 million in 2007, while Dimon enjoyed $40 million in 2006.
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